Equipment Financing for Small Businesses

Equipment Financing for Small Businesses

Equipment financing allows small businesses to invest in the tools and machinery they need to grow and succeed. By working with an equipment financing company, you can fund the purchase of vital equipment and pay for it over time, preserving working capital and keeping your business running smoothly.

But what exactly is equipment financing, and how does it work?

What is Equipment Financing?

Equipment financing is very much as it sounds. It’s the process of securing funds to purchase equipment for your business. Equipment can include anything from vehicles and machinery to office furniture and computers.

Many small businesses struggle to get their hands on the equipment they need to compete without equipment finance. For instance, agricultural companies looking to buy tractors or other heavy machinery may find it challenging to do so without additional funding. The same goes for companies in the construction industry that need vehicles or specialized tools.

What’s more, with equipment supply chain issues still lingering globally, smaller companies need cash on hand fast to secure tools and machinery before it’s gone to competitors.

Equipment financing companies provide the necessary funds to small to medium-sized businesses to do just that. Then those firms repay the upfront cost over the useful lifetime of the equipment.

How Does Equipment Financing Work?

Traditional equipment financing works by the purchased equipment serving as collateral for a loan. If the business owner defaults on the loan, the lender can take back and sell the equipment to recoup their losses.

Equipment financing companies tend to appraise the equipment being purchased and then offer a loan for a percentage of the total value. The business owner then makes monthly payments on the loan, plus interest, across the usable life of the equipment. This repayment period could be anywhere from a few years to a decade.

Typically, while most lenders offer 80% to 100% financing, a down payment of as much as 20% is often required for some equipment. Interest rates will also vary considerably based on the equipment being financed and the creditworthiness of the borrower.

However, not all equipment financing works this way. There are options available, including Merchant Cash Advances (MCAs), that do away with most of the traditional requirements of banks, credit unions, and other specialist lenders.

Why Your Business Should Consider Using a Merchant Cash Advance for Equipment Financing

A Merchant Cash Advance (MCA) is an equipment financing method that presents numerous advantages to small business owners over equipment finance loans.

Firstly, there aren’t any strenuous requirements. There’s no need to make a significant down payment on your machinery, no need to provide an extensive business plan for the equipment, nor a need to use it as collateral to secure the financing.

With an MCA, your equipment financing company will give you a lump sum of cash in exchange for a percentage of your future sales. All you need to do is provide some basic information about your business and your revenue figures, and specialist lenders such as Canyongate Financial can give you a decision and the cash in as little as 24 hours.

This funding option is well-suited to startup businesses, those in industries where banks are tentative about lending (such as cannabis farming), and companies with little in the way of collateral.

Another significant advantage of using an MCA for equipment financing is that you only make repayments when you generate revenue. When business is slow, your repayments are smaller. When the going is good, you pay a little more off the top. This provides considerable flexibility to business owners with seasonal revenue streams or uneven cash flow.

What Does My Business Need to Secure Merchant Cash Advance Equipment Financing?

All you need to do as a small business owner is provide some details to your MCA provider in order for them to ascertain how much they’re willing to lend you.

The details you’ll need to provide include:

  • The industry in which you operate
  • How long you’ve been in business
  • The current condition of your business finances
  • The current volume of debit and credit card transactions
  • Your personal credit score

And that’s it! With that information relayed to your equipment financing company, you’ll have your decision within a few hours, and the cash will follow in one lump sum payment, typically within a day or two.

Your repayments will be based on a factor rate, which is determined using the information provided above. For instance, if your piece of equipment requires $50,000 and you’ve been approved at a factor rate of 1.3, then you’ll need to pay $65,000 over the course of your repayment period, which could range anywhere from a couple of months to a couple of years, depending on your business needs.

This repayment schedule is automatically deducted from your future sales, so you don’t need to worry about making timely payments. It’s all taken care of automatically on a daily, weekly, or monthly basis. You also have the flexibility to have your repayments structured as a percentage of your debit and/or credit card sales, or you could pay a fixed amount each day, week, or month.

Lastly, MCAs are open to all kinds of small and medium-sized businesses, regardless of industry. As long as you can provide the information detailed above, you will likely be approved for financing.

Secure Equipment Financing Today with Company Name

At Company Name, we provide equipment financing to companies that need it the most. We’re proud to offer MCAs as a form of equipment financing, as we understand that not all businesses have access to traditional forms of financing, such as equipment finance loans.

Not only do we not require the rigorous application process that banks and other traditional lenders typically request, but we can also provide you with the cash you need in as little as 24 hours.

Our MCAs are available for funding amounts of as little as $5,000 and as large as $2 million, and we can arrange a repayment schedule that works with your business needs.

To learn more about how Company Name can help you secure the equipment financing you need, contact us today or apply online now.

Leave a Reply

Your email address will not be published. Required fields are marked *

× four = thirty two